Rexnord, Inc. v. Ferris

• Decision Date: 18 January 1983
• Parties: REXNORD, INC., a Wisconsin corporation, and Nordberg Manufacturing Company (S.A.) (Pty) Ltd., a South Africa corporation, Petitioners on review, v. Reginald J. FERRIS, Helser Machine Works, Inc., an Oregon corporation, and Reginald J. Ferris and W. Don Miller, doing business as Steton U.S.A., Respondents on review. CA 19104; SC 28419.
• Court: Oregon Supreme Court

Page 673

657 P.2d 673

294 Or. 392

REXNORD, INC., a Wisconsin corporation, and Nordberg Manufacturing Company (S.A.) (Pty) Ltd., a South Africa corporation, Petitioners on review, v. Reginald J. FERRIS, Helser Machine Works, Inc., an Oregon corporation, and Reginald J. Ferris and W. Don Miller, doing business as Steton U.S.A. Respondents on review.

CA 19104; SC 28419.

Supreme Court of Oregon.

Argued and Submitted May 4, 1982.

Decided Jan. 18, 1983.

Malcolm E. Wheeler, Los Angeles, Cal., argued the cause for petitioners on review. With him on the briefs and the petition were Hughes, Hubbard & Reed, Los Angeles, Cal., and Fredric A. Yerke, James N. Westwood, and Miller Nash, Yerke, Wiener & Hager, Portland.

William E. Hurley, Portland, argued the cause for respondent on review. On the brief were Michael B. Wallstein, and Bernard, Hurley, Crawford & Kneeland, Portland.

Before DENECKE, ^* C.J., and LENT, LINDE, PETERSON, TANZER, ^** and CAMPBELL, JJ.

PETERSON, Justice.

The plaintiffs filed a complaint against the defendants seeking injunctive relief, compensatory damages and punitive damages. ¹ The trial court, sitting without a jury, enjoined the defendants and awarded general damages. Although the trial court found that tortious conduct had been proved of a nature to support an award of punitive damages of $35,000, the court refused to award punitive damages, and instead entered a conclusion of law that "[t]his court is not authorized to award punitive damages, for the reason that a party who seeks injunctive relief cannot also obtain from the same court an award of punitive damages." The plaintiffs appealed, claiming that the scope of the injunction was too narrow and that punitive damages should have been awarded. The Court of Appeals affirmed, 55 Or.App. 127, 637 P.2d 619 (1981).

On review in this court, the plaintiffs have raised only the punitive damages issue. This court has upheld punitive damage awards in actions at law in a variety of situations. See cases cited in 1 Committee on Continuing Legal Education, Oregon State Bar, Damages ch. 4 (rev. ed. 1980); Pedah Company v. Hunt, 265 Or. 433, 509 P.2d 1197 (1973), however, held that punitive damages are not recoverable in an equity suit because "the allowance of punitive damages by a court sitting in equity, without a jury, is inconsistent with a court in equity doing justice between the litigants." ² We granted review to again consider the Pedah holding. ORCP 24 A permits the joinder of legal and equitable claims. It provides:

"A plaintiff may join in a complaint, either as independent or as alternate claims, as many claims, legal or equitable, as the plaintiff has against an opposing party."

In their complaint, the plaintiffs alleged that they were entitled to recover general and punitive damages flowing from the defendants' tortious conduct. The plaintiffs proved their cause of action. Aside from constitutional rights to jury trial discussed below, we see no impediment to the award of punitive damages where tortious conduct which would otherwise support an award of punitive damages has been established, even though injunctive relief is sought and granted in the same action. ORCP 24 A expressly permits the joinder of such claims. Although procedural problems may arise akin to those existing before the Oregon Rules of Civil Procedure became effective, the joinder of legal and equitable claims is permissible, including claims for punitive damages.

Pedah holds that a court of equity cannot award punitive damages incident to the granting of injunctive relief. It is not clear whether the Pedah holding is limited to an injunction case in which the foundation for the recovery of punitive damages has not otherwise been proved. Inasmuch as the joinder of legal and equitable claims is and was expressly permitted by ORCP 24 A and its predecessor, ORS 16.221(1), where a right to punitive damages has been pleaded and proved, the preferable procedure is to adjudicate fully the dispute in one action.

We hold that if the plaintiff pleads a claim for relief which, if proved, would permit an award of punitive damages; if the plaintiff proves his right to recover punitive damages; and if the court finds that a right to recover punitive damages has been established, the joinder of a request for additional injunctive relief does not prevent a court from awarding both punitive damages and injunctive relief. To the extent that Pedah is inconsistent with this rule, it is overruled. ³

That does not end the inquiry, however. The defendants assert that they were entitled to a jury trial on the punitive damage claim. Article I, section 17, of the Oregon Constitution provides:

"In all civil cases the right of Trial by Jury shall remain inviolate."

Article VII, section 3, of the Oregon Constitution provides:

"In actions at law, where the value and controversy shall exceed $200, the right of trial by jury shall be preserved * * *."

Under the law in effect when these constitutional provisions became effective, a claim for punitive damages would have been asserted in a civil action at law.

The plaintiffs assert that the defendants waived their right to a jury trial, arguing:

"In the instant case, defendants allowed the punitive damages issue to be decided by the trial court, demanding no jury and arguing only that the court could not award both injunctive relief and punitive damages in one proceeding. That argument, which the Court of Appeals has implicitly and necessarily rejected in its opinion, was the basis of the trial court's ruling. Defendants did not raise the issue of entitlement to a jury, if they can accurately be said to have raised it at all, until the appellate level, after the trial court had made its factual findings against them and after the court had determined that a $35,000 award would be appropriate." (Emphasis in original.)

This case traced an unusual path in the trial court. Evidence was first produced at a hearing on a motion for a temporary restraining order. After the hearing the parties entered into a stipulation which was approved by the court and which provided:

"It is hereby stipulated between plaintiffs and defendants through their attorneys that the hearing on plaintiffs' motion for preliminary injunction held by this court on July 14, 15, and 16, 1980, shall instead be deemed, treated and regarded for all purposes as a hearing on a permanent injunction, reserving for trial or other disposition at a later date any other issues in the case." (Emphasis in original.)

The record shows this colloquy at a hearing on August 27, 1980. The plaintiffs' attorney stated:

"The remaining matter: * * * is the timing on the questions of compensatory and punitive damages, and where we go from here with respect to those.

"THE COURT: I haven't given that any thought, Counsel. I appreciate your suggestions.

"MR. YERKE [plaintiffs' attorney]: Well, I don't think at this late hour there is any point in going into it in detail. But I think our feeling would be that, with respect to compensatory damages, we would accept the figures that are set forth in the record by Mr. Hurley [defendants' attorney], indicating that the net profits that were actually realized by the defendants as a result of the manufacture of the six parts in question totaled, I believe, $275. And we would have no objection to the compensatory damages being entered for that amount.

"However, as to the punitive damages,--and this is especially now in view of some of the attitudes which I inferred from the Court's remarks, that there should be a substantial award of punitive damages; and especially because of the fact that there has been wanton disregard of social obligations here.

"And we would submit to the Court--and perhaps this isn't the time to submit it on a basis for a decision--but we would submit that if we are not going to get the relief that we requested in paragraph three, that the punitive damages should compensate us for the out-of-pocket expenses that have been involved in bringing this litigation, and also an award of reasonable attorneys' fees.

"THE COURT: All right, I understand, Mr. Yerke. Why don't we do this? Let me reconsider the position of the injunctive relief; make a decision on that; and then we will take up the points you raise sequentially. And, hopefully, I will be able to give you a finalized decree on the injunction by next week."

Thereafter, the plaintiffs submitted a memorandum in support of their punitive damage claim. The record suggests that the defendants filed a memorandum on the punitive damages question, but we find none in the file. There was no motion to empanel a jury to decide the damage questions. We find nothing in the record indicating that the defendants objected to the award of punitive damages other than on the Pedah premise that punitive damages are not recoverable when injunctive relief is sought. The defendants never objected to the award of punitive damages or compensatory damages on the ground that they were entitled to have a jury decide that question.

There was a final hearing on November 6, 1980, at which the trial court stated:

"I further find that the imposition of punitive damages is not only appropriate in this case but it would deter the defendants and others from such conduct.

"I say this recognizing as Mr. Hurley has said that the Oregon Courts disfavored punitive damages, and I personally disfavor punitive damages, but I think in this type of case, a trade secret type of case, that the more I dwelt on the subject I adopt the reasoning of Mr. Wheeler [one of plaintiffs' attorneys] that punitive damages uniquely should aid the protection of the plaintiff's trade secrets.

"In my opinion the amount of punitive damages to achieve this objective is the sum of $35,000.

"On the question of whether or not I'm authorized to issue punitive damages, I conclude that the trial court is not authorized in this type...